Alcoa Stock's Pullback May Not Last Long

The equity is flashing a historically bullish signal on the charts

Digital Content Manager
May 8, 2024 at 2:50 PM
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Alcoa Corp (NYSE:AA) stock is down 3.1% to trade at $36.41 at last check, looking to snap a four-day win streak as it pulls back from an April 29, 52-week high of $38.20. The 40-day moving average and $34 region contained this recent pullback, however, and the shares now look ready to bounce, according to a historically bullish signal.

Specifically, the equity's recent peak comes amid historically low implied volatility (IV), which has been a bullish combination for Alcoa stock in the past. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, there have been three other times in the past five years when the stock was trading within 2% of its 52-week high, while its Schaeffer's Volatility Index (SVI) stood in the 20th percentile of its annual range or lower. This is now the case with AA's SVI of 45%, which sits in the low 8th percentile of its 12-month range.

AA 40 Day

White's data shows that one month after these signals, the stock was higher, averaging a 10.4% return for that time period. From its current perch, a move of similar magnitude would put Alcoa stock at a fresh 52-week high of $40.

An unwinding of short interest could push the equity even higher. Short interest added 17% in the last two reporting periods, and the 15.41 million shares sold short make up 8.7% of the stock's available float.

A sentiment shift in the options pits could also generate tailwinds. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), AA's 50-day call/put volume ratio shits higher than 87% of readings from the last 12 months.


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